SJR 29

Members of the joint subcommittee heard the annual
Virginia Employment Commission's (VEC) unemployment insurance
trust fund briefing. This briefing provides key unemployment
statistics as well as analysis of the relationship between the current
employment climate and the solvency of the trust fund. According to
the VEC commissioner, unemployment rates in 1997 have been
below the same-month 1996 rates. He attributed the low level
of joblessness in the Commonwealth to good weather, especially
during the winter months, and a healthy economy.

1997 Changes

Legislation passed during the General Assembly's 1997
Session (HB 2559, SBs 1018, 1089) increased benefits and
eligibility for employees, lowered taxes for employers, and altered the
statutory formula used to calculate the trust fund's solvency rate.
The commissioner explained that as a result of the lower
earnings requirements, approximately 420 new claimants were eligible
for benefits after July 1, 1997. Estimates provided by the VEC
predict that by 1999 about 6,300 claimants who were not
otherwise eligible will receive benefits due to the lowering of earnings
requirements.

An individual employer's unemployment tax rate is determined by
the employer's experience over the last four years and the trust fund solvency level.
By changing the statutory formula used to calculate trust fund solvency, employers
in Virginia should save approximately $154 million in unemployment taxes over
the next six years. Approximately 89,000 employers, 88,000 of whom are small
employers with fewer than 50 employees, will pay no state unemployment taxes for the
next four years.

Trust Fund Solvency

The joint subcommittee was advised that the predicted unemployment
insurance trust fund solvency rate for 1997 will
be 130.9 percent. The solvency rate reported in June of 1996 was 90.5 percent. The
VEC provided the data summarizing the trust fund.

Table 1: Trust Fund, 1996 and 1997

1996 (Actual)

1997 (Projected)

January 1 Balance

$769

$877.2

Tax Revenue

$255.1

$195.9

Interest Revenue

$56.7

$59.2

Benefits

$203.5

$192.7

December 31 Balance

$877.2

$939.6

Solvency Level (6/30)

90.5%

130.9%

Dollar figures in millions of dollars.

Additionally, the VEC predicts that trust fund solvency will exceed 100 percent
for the next four years, assuming no further legislated changes in benefits or taxes. The average tax paid
by an employer for each employee peaked at $115 in 1995 and
is expected to fall to $77 in 1997 and to $42 in 1998 and 1999.
This 63 percent decrease in the average tax can be attributed
to the tax cut outweighing the benefit increases. All categories
of employers saw a decline in their average tax rate as a result
of the legislation.

SJR 380

The joint subcommittee also discussed Senate Joint
Resolution 380, introduced during the 1997 session of the
General Assembly. The resolution calls for an examination of the
provisions of law establishing responsibility for employee
benefit charges. Currently, an employer is charged for any
benefits paid to an employee after that employee has worked for
that employer for 30 days.

Testimony by the patron of SJR 380, Senator
Stephen Newman, suggested that employers, especially those in the
high technology and manufacturing sector, need more time to
evaluate employees before making permanent employment offers.
Increasing the 30-day period for benefit charges would
enable employers and employees to make better and more
productive employment decisions. The joint subcommittee agreed
unanimously to further study this issue in 1998.